Beyond the correction: These sectors and themes are poised for a comeback

About 75% of stocks in the BSE500 index have tanked more than 25% from their respective 52-week high levels amid the ongoing selling in the domestic equity markets. In contrast, the benchmark BSE Sensex has fallen 14% from its 52-week high. The broader indices, BSE Midcap and BSE Smallcap, have lost 21% and 24%, respectively. In case of any market reversal, which sectors are likely to recover first? Is there a silver lining that could help stabilise the markets?

In an interaction with Business Today, Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, shared her insights. Edited excerpts:
 
BT: Which sectors or themes are looking attractive after the recent correction?
 
Srivastava: Post-correction, we see attractive opportunities in quality midcaps and value stocks. Financials, particularly high-quality lenders, look compelling as they have corrected despite strong fundamentals. Manufacturing-related plays in defence, capital goods, and auto ancillaries remain strong. We are also tracking turnaround signals in consumption and real estate, where demand remains structurally positive.
 
BT: With the Nifty 50 correcting from its peak, what technical or factor-driven insights do you see for identifying potential recovery points?
 
Srivastava: With the Nifty 50 correcting from its peak, we are analysing key factor-driven indicators to assess recovery points. Rather than relying on technical indicators like RSI, we use factor-based valuation spreads, earnings revisions, and macroeconomic stability indicators to determine oversold conditions. Factor rotation into quality and defensive plays suggests that the market is still in a cautious mode. However, improving earnings revisions, stabilising global liquidity conditions, and strong domestic flows could signal a potential recovery. We also monitor FII flows and credit growth data, which tend to precede market rebounds.
 
BT: What kind of models Wright Research follow while identifying trend and stocks in uncertain environment?
 
Srivastava: Our investment models are rooted in a multi-factor approach that adapts dynamically to market conditions. We focus on momentum, quality, and growth factors while overlaying macroeconomic and sentiment indicators to manage risk. In uncertain environments, we emphasise defensive factors like low volatility, high dividend-yielding stocks, and relative strength indicators to identify pockets of stability. Our regime-switching models help adjust exposure based on volatility and market cycles, ensuring we don’t remain overexposed to riskier assets during downturns.
 
BT: Are your AI-driven strategies signalling any shifts in key sectors or asset classes that investors should watch closely?
 
Srivastava: Our AI-driven models are currently indicating a shift toward defensive sectors, including FMCG, healthcare, and utilities, while some cyclical sectors like financials and real estate show near-term weakness. Additionally, commodity-linked sectors are gaining strength, supported by inflationary trends and global supply chain shifts. The technology sector remains a mixed bag, with select companies benefiting from AI-driven growth while others face valuation concerns.
 
BT: With India’s push for manufacturing growth and digital transformation, how is Wright Research positioning portfolios to capture these emerging opportunities?
 
Srivastava: India’s push for manufacturing and digital transformation presents significant opportunities. We are overweight in industrials, capital goods, and select segments of the new-age digital economy. The PLI (Production-Linked Incentive) schemes and rising domestic capex spending create strong tailwinds for engineering, automation, and infrastructure-linked plays. In the digital space, we focus on platform-based businesses, fintech, and companies benefiting from AI and cloud computing growth.
 
BT: With rising gold prices and recession fears, are you suggesting any strategic allocations to commodities or defensive plays to hedge against downside risks?
 
Srivastava:  With rising gold prices and global macro uncertainty, we are advocating a balanced approach to hedging. Gold remains a key strategic allocation, particularly as a hedge against inflation and geopolitical risks. We are also maintaining selective exposure to commodities that benefit from global supply chain disruptions. Defensive plays like high-dividend-yielding stocks and quality bonds are also part of our risk-management strategy. However, rather than overly shifting to defensives, we balance risk-on, and risk-off exposures based on market conditions.
 
BT: How do you see the role of women evolving in India’s investment landscape — both as investors and fund managers?
 
Srivastava: Women are increasingly shaping India's investment landscape, both as investors and fund managers. Traditionally, investing was seen as a male-dominated domain, but today, more women are independently managing their wealth and taking an active role in financial decision-making. The rise of digital platforms and financial literacy initiatives has played a significant role in making investing more accessible. On the fund management side, while representation remains low, we are seeing a gradual increase in women leading investment strategies and managing institutional capital. As performance data accumulates, it is clear that diverse teams and female fund managers bring differentiated perspectives that can enhance long-term returns.
 
BT: How Wright Research contributes to improving financial literacy and encouraging more women to participate actively in wealth creation?
 
Srivastava: We actively work towards improving financial literacy and encouraging women to take charge of their wealth. Our content—blogs, webinars, and social media—aims to simplify investing and make it accessible. We have also seen a rising number of women investing through our PMS, often looking for structured, data-driven approaches rather than speculative trading. Additionally, through collaborations with financial influencers and educators, we hope to break traditional biases and encourage women to participate actively in the markets.